Back Above $8,500: Does Bitcoin’s Rally Have Legs? – CoinDesk

Bitcoin (BTC) has bounced back above $8,500, but the rally is not backed by decent trading volumes, the technical charts indicate.

The cryptocurrency closed below key technical levels on Thursday, signaling a bearish breakdown, but the sell-off unexpectedly ran out of steam at $7,925 a day later. Subsequently, bitcoin gained more than $500 over the weekend, rising back above resistance at the 50-day moving average.

At time of writing, BTC is changing hands at around $8,530, having clocked a six-day high of $8,644 earlier today.

While last week’s bearish trend seems to have run out of steam (as seen in the charts below), the weekend’s low-volume rally risks trapping the bulls on the wrong side of the market.

4-hour chart

The inverse head-and-shoulders breakout indicates short-term bullish trend reversal – i.e. the pullback from the high of $9,990 has ended and the breakout has opened the doors to $9,000 (target as per the measured height method.

As a result, the probability that bitcoin will rally to $9,000 this week is high. However, the bullish case significantly weakens if we take into account the figures for trading volume.

Volume is an important indicator, as it shows the level of interest in bitcoin. A rally backed by high volumes means greater reliance can be placed on the bullish move. Conversely, a low volume rally trends to end up being a bull trap.

In BTC’s case, currently, trading volume on Bitfinex continues to decline and more importantly remained low alongside positive price action, as seen in the chart above. Further, trading volume across all exchanges fell below $5 billion over the weekend – the lowest level since April 11, according to CoinMarketCap.

Thus, the sustainability of the rally seen over the weekend is under question.

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